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Price Discrimination along Multiple Dimensions: New Evidence from a Regional Airline

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  • Ambarish Chandra

Abstract

I examine the case of a firm that practices both second-degree and third-degree price discrimination. I present a model showing conditions under which the premium for higher quality can either rise or fall as the firm implements group pricing. I then use new data from a regional airline to estimate how the two kinds of price discrimination interact, and how each is affected by changes in competition. I establish three key results, all new to the literature. First, in different markets, the two kinds of price discrimination can either offset or reinforce each other, in a manner that fits the model's predictions. Second, inter-temporal differences in prices are purely driven by price discrimination, rather than by scarcity pricing. Third, competition increases the extent of both kinds of price discrimination.

Suggested Citation

  • Ambarish Chandra, 2020. "Price Discrimination along Multiple Dimensions: New Evidence from a Regional Airline," Working Papers tecipa-676, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-676
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    References listed on IDEAS

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    More about this item

    Keywords

    Price Discrimination; Airlines; Advance Purchases; Competition;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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